tv Street Signs CNBC May 22, 2012 2:00pm-3:00pm EDT
out of the rough. >> ung. natural gas etf here. it's had a sensational spike. up about 9% in the last couple trading sessions. >> why? >> an oversold -- we saw natural gas flush under $2. now back up closer to $3. >> that'll do it for "power lunch," sue. >> "street signs" is next, ty. have a great afternoon. we'll see you all tomorrow. and welcome to "street signs" where a scathing new report says wall street has some explaining to do about what it thought of facebook and who it told. the author of that bombshell is here as we dig for answers. mark zuckerberg, where are you? the stock is struggling. many investors feel used. where's the love or at least the public comments? you're a public ceo now, mark. you've got to act like one. beyond facebook. is it time to bet on the little man riding the horse? we'll explain that one. and a disaster du jour from big "d" that shows just how
scary the blogesphere can be for investors. dow and s&p up for two days in a row now. if that doesn't sound like a big deal we should point out that has not happened since april 26th and 27th. three major averages have their best two-day percentage gains in almost a month now with the nasdaq also riding a two-day win streak. it is still looking at its biggest one-day drop in two years. facebook also losing even more ground today. but if you're looking for the bright side, it's well off its session lows. in the meantime, down to the floor of the nyse. bob, i know we're losing a little bit of steam in terms of our rally today. yesterday you were explaining the rally, maybe it's a bounce off. oversold conditions. how would you explain the rally continuing today? >> we're getting -- this happens every day. one trader called it crisis tennis. the growth components versus austerity components. we've had this rally in the last day and a half on the hopes there would be a big breakthrough at the eu summit that's going to happen starting
tomorrow. that the growth components were fwoing to come up with very creative plans. the euro is up again this morning. then in the middle of the day there were all sorts of comments saying don't expect too much out of this. we're fwoing to have a hard time coming up with a consensus. a lot of divisions. see the euro moving down. we've come off of our high since then. also problems still with the global growth issue. we've got the oil component down. the energy dpoepts are down. look at this. copper town as well. you can see the energy stocks have moved to the downside in the middle of the day. many of the big material names have as well. crisis tennis. that's my phrase for today. mandy? >> crisis tennis. it's interesting that copper's moving down considering that statement out of china. that's another conversation. thanks, bob. in a moment we're going to dig in on what the insiders of wall street knew about facebook and whether or not they knew it before you and i did. but before we do that, let us walk you through facebook's road to going public. here with that timeline is bertha coombs. >> hey, mandy.
if the morgan stanley-led ipo had its own facebook page, its timeline would start on february 1st. they announced their ipo plans in the s-1 filing. april 23rd the company shocking investors reporting q-1 net profit was dragged down by higher exxpenses. may 3rd we get details of the offering. 337.4 million shares with a price range of $28 to $35, where it's trading right now. also we hear more about its mobile strategy during the road show which kicks off on may 7th. the q & a over the next couple of days raises some questions about how they're going to monetize mobile strategy. in an amended s-1 on may 9th fb cautions the rapid shift by users to mobile devices could impact revenue growth. one month after having bought instagram for $1 million in an effort to boost the mobile presence. cnbc confirms at some point during the road show, research
analysts at lead underwriter morgan stanley sharply reduced their fb revenue forecast. analysts at goldman sachs and jpmorgan did, too, according to reuters which says that info was shared with some investors. that's a big question here. who got the revised projections? two days before pricing, the price range is bumped up to $34 to $38 per share. then the next day the offering size is upped by 84 million shares to a total of 421 million shares. which priced the night before the ipo debut at the top of the range, $38 per share, raising $16 billion. and we all know what happened after that, brian. >> we certainly do. thank you very much, bertha. the reporter tracking the details of the timeline is alex debar of reuters. he joins us now from san francis francisco. great reporting. great story. it's got a lot of attention today. thanks for joining us. the most fascinating thing about it, too, is not only what morgan
stanley did but it seems clear from your reporting that they were pretty selective in who they told. >> yeah. this is a tricky situation. if the analysts really had concerns -- he may have cut his estimates. then he passes that message on to the sales force at morgan stanley. they hit the phones. who do you call first. you can't call everyone at the same time. this happening in the middle of the road show has put them in a tricky situation. >> it certainly has put them in a tricky situation. i'm wondering whether or not this is a situation that might make it very difficult for them to get future ipo business. >> one of the things that's been brought up with some calls i've been making this morning, and take it with a pinch of salt. these are other underwriters on the deal. that morgan stanley really controlled this process with a vicelike grip and they have in the past. some of the other underwriters saying maybe if they were more open at the process and talked to other underwriters they'd have got more of a sense that
this mobile issue was a problem and maybe there'd have been a disclosure earlier in the process and they wouldn't have had to go through this mid-road show. >> morgan stanley has some cover here. in the revised s-1 filing, facebook did say things might be slowing down a bit. morgan stanley can point to that and say, facebook said it. it seems this is another case where the little guy, mom and pop, retail investor gets hosed because they're not being told. and while they probably should, it's unlikely they're reading the revised s-1. the retail investor clearly getting hosed on this. >> well, yeah. first point to make on the disclosure, facebook doesn't have an obligation to put forward looking forecasts in the s-1 document. they met their obligation in putting this in. the issue may be maybe it should have been put in before the road show started. obviously that didn't happen. and then, you know, you go beyond that point. you put the disclosure in there.
any good analyst will look at that disclosure and be right on the phone with the company. we don't know for sure, but the company probably responded and gave a bit more color. then the analysts, several of them, cut their ratings. of course if you're looking at a chain of people to call first, the retail investor is always down at the bottom. because these firms make their money from the top institutional investors. >> to hold that thought, i want to bring this in. on fast money half business insider ceo henry blodgit had this to say. take a listen. >> i have never heard of an underwriter analyst changing estimates in the middle of a road show before. the fact that an estimate change was made and communicated to a few big institutional investors and not announced publicly, to me, is just a gross violation of selective dissemination where some investors have information that others do not. >> essentially -- very rare from
an underwriter just ahead of the ipo. at the same time that they were increasing the size of the offer and increasing the price as well, that would be almost unheard of, right? >> yeah. the thing that really caught our attention on this story initially was that the investors had never heard of something like this happening on the road show. the general point is you got to do due diligence on the companies beforehand. when the ipo goes, the message has to remain exactly the same throughout the ipo or you get into this situation. so that is going to be a problem. it certainly caused some investors to freak out. >> okay. thank you very much for that. let's get more now on the impact this bungled facebook ipo may have on the already fragile psyche of the investor. jack, great to have you on the phone. i'm not going to mince my words. did the retail investor get screwed? >> i guess that's one way of looking at it. i wouldn't say, mandy, that's
maybe quite right. the fact of the matter is, information permeates everything sooner or later. in this case i imagine it was sooner. it's not as if the information given to the underwriters never got over to the retail investor. i think the essentially problem is that investors are their own worst enemies. you know, the system can make that worse. probably can't make it much better. what they do is they bet on price. sheer speckulation. here comes an offering. everyone thinks it's going to be hot. i read that in the paper. i'm going to jump on the band wagon. when it gets up i'll get out. now everybody's angry because it didn't go up. not the first time it's happened in history. in recent years, back in the internet days of the late 1990s -- >> there was amazon in 1997. >> jumping on the band wagon was a very profitable thing to do for a while. then the band wagon or
merry-go-round to change the met tor ever so slightly, the merry-go-round stops. it's like a game of old maid. somebody's always left holding a bad card or musical chairs. someone can't get into the last chair. this is a classic example, i think, of investor greed, including institutional greed. underwrit underwriter greed. company greed. the message to me is, when all the parties to a tranks action are greedy, this is the kind of outcome you can expect. >> what can you learn from this, jack? >> i say don't fool around with new issues, new offerings, ipos. don't fool around even i go all the way to saying don't fool aaround with individual stocks. nobody can predict their price performance. nobody can predict their future value. while nobody can predict the future price of the total stock market, we can predict its future performance, which depends clearly on 100% on how the underlying american economy does. how corporations do in the long
run. and since the beginning of time, corporations have paid dividends out of earnings, reinvested the remaining earnings and grown over, you know, hundreds of years. and i would expect that to continue. maybe a little bit slower for a few years. maybe never back to the high levels of earlier. maybe this is, in fact, a new kind of an economy. a little slower growing economy. but betting on price is mere speculation. and betting on value is an intelligent way to own property as compared to trading in stocks. >> would you back facebook, jack? you're a clever guy. is this a stock you would back and you think would be higher today than a year from now? >> i would never fool around with individual stocks. it's not my own, for want of a better expression, stock and trade. stocks can do what they wish. to some degree the market can do what it wishes. when you look back at the grand
wave of ipos, the new economy, the internet, the information age back in the late '90s and ear early 2000s, it's a fad. it's in the price of the stock. people are looking for a free ride upward in a new world. and truth told, the old world persists in making its reality felt. that is, it all comes down to value. it all goes away from price. and avoiding ipos and avoiding even individual stocks is the best strategy for an investor. you don't have to trade. you don't have to pay all those costs. you don't pay all the taxes if you're lucky to win. so i remain maybe buttressed somewhat by facebook and the other internet or social networking companies that are all lined up out there. watch out. it's a dangerous game. >> jack, thank you so much for joining us. we really appreciate your thoughts. i think your point was extremely well made. amazon back in 1997 dropped
below its offer price i think for several months stayed down below there. i think a year later it had quadrupled. now shares above 200. >> chill out for a couple days. everybody's upset. the gm thing, i continue to believe really hurt facebook a little bit. we'll talk more about that. i want to give you an update on patriot coal. stock down 34%. was down 47% earlier today. the company coming out and reiterating what it said earlier this month, that it has a commitment for a revolving credit line of $625 million. the exact first line of the release reads like this. earlier this month patriot coal announced it entered into a commitment for a new revolving credit facility and new loan term facility for a total of $625 million from a variety of banks and that they continue to work with said banks about the optimal financing package. this stock down just under 90%, mandy, over the past 12 months. we know patriot coal said itself one of its biggest customers was nearing default.
the stock has resumed trading. i think people realize this is something the company has already announced earlier this month. whenever you have a headline and a company down this much and they're talking about financing options, talking about customers going into default, this is what you get. we'll watch pcx. >> absolutely. it has been rather tough lately to be a ceo. in terms of the headlines. not in terms of the big money. we're asking who's having the worst may so far? is it jamie dimon at jpm for the trading losses? bob greifeld. aubrey mcclendon under pressure over his personal borrowings around the company. scott thompson. remember, he got canned over his resume. ron johnson? some people saying maybe he doesn't have the magic to turn around jcp. or is it you? the ceo of your own life. the individual investor. we've got six choices. we want you to vote. streetsigns.cnbc.com. or go to cnbc.com. i'm sure there's a link. we will read your answers and
get it all done coming up. okay. investors can breathe easier, at least according to your next guest who remains cautious, but does not see armageddon for these markets. here's stewart schweitzer. if i'm not wrong, i think you're still advising your clients to be underweight equity. but you still think it's important to own them given how cheap they are? >> that's right, mandy. good to be here, by the way. yak bogle said a few minutes ago that investors are their own worst enemies. that's true in so many dimensions. take the trading pattern of the last few years. the beginning of every year investors have said, oh, finally, it's over. we're finally back to the good ole days. they bid things up and they go too far. so then the news is not as favorable as they were hoping, and that's the kind of environment we're in right at the moment. even if not literally today.
but certainly this month. so things get taken down. i think when that happens, it creates a fresh buying opportunity. and there are still so many people sitting with so much cash on the sidelines. >> they're waiting to get in. i'm sure a lot of them have missed out. i would imagine that any kind of problems like we're seeing in europe might make you want to start nibbling. at what point would europe be a buy for you? >> oh, well, u think the cheaper it gets, obviously, the worse the news would have been that would make it cheaper. but also the cheaper it gets, the better the value potentially becomes. i'm not going to put a figure on it. what i will say is that whatever happens here with the greek election, which we all know is now just a few weeks away, less than a month away, hopefully there'll be some better feeling about it. but whatever happens with the greek election and -- and after that, i think the cycle of
summitry, summit after summit after summit in europe is going to go on. the european markets could get to be a little bit of a better buy just because they're beat up so badly. staying underweight europe i think still makes the most sense in here. >> how underweight euro? like, completely avoid like the black plague? or selectively still buy european companies because they're all not going away? >> they're all not going away, brian, of course not. german exporters continue to rock. well they should, because they've got a tremendous cost advantage. a production cost advantage. so avoid all of europe? no. in fact, in my experience when investors bail completely on -- on an asset class, it's very hard for them to get back in. let's face it. if you're an investor who's price sensitive, and we all
claim to be, then you've got to be poised, you've got to be thinking about entering when others have exited. >> just a real quick comment from you. i no you don't do individual stocks. but what is your call on social media in general? or is it not possible to generalize considering if you look at the performances of the various social media players since their ipos, it's been very disparate? >> i'm probably in the wrong generation to comment on social media. but i do think it's got a pretty bright future overall. the question is, how will people make money from what is clearly an area of great interest to the -- to the american public, to the public worldwide. >> thank you so much for joining us. we have a market flash with brian shactman. >> patriot coal pcx. sully had a nice psasummary. stock halted again. down more than 43% plus. spiked to 28% if that's a spike. stopped again. we'll keep an eye on it.
coming up next on "street signs," from his wedding day to his love for his dog, mark zuckerberg has plenty of time to post on facebook. maybe it's time to stop posting and start talking, dude. is it time he gave us all a status update on facebook's ipo? >> no. he'll be sued. filthy rich and freaked out. a new look at why the wealthy are not feeling so confident. maybe they only have the lambo in yellow. i know it's tough. we'll talk more about this. stick around. luckily though, ya know, i conceal this bad boy underneath my blanket just so i can get on e-trade. check my investment portfolio, research stocks... wait, why are you taking... oh, i see...solitary. just a man and his thoughts. and a smartphone... with an e-trade app. ♪ nobody knows... [ male announcer ] e-trade. investing unleashed.
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ralph lauren getting a pop on solid earnings and guidance. margins up. gross margins, too. stock had been up over 10% earlier in the day. right now it is up, wow, really come back. good grief. 3.7%. senior analyst at goldman sachs covering the broadlines retail sector. first off, what's happened to the stock? >> adrienne. >> or that. the third one. i'll be right one of these times. sorry about that. >> no problem. >> why has it come back so much from its intraday high, you think? >> i think it was a relief rally initially. fourth quarter beat expectations. we were higher on the street. they handily beat us. i don't think much has changed.
they came out with a strong fourth quarter. guided conservatively like they usually do. that's their trademark. we still think the story is very compelling for investors today. >> what are the challenges, then? >> you know, the issue here, you know, we're a fan of brands versus boxes. we think ralph lauren is exactly in the sweet spot there. i think the challenges are the macro backdrop. we heard from them that europe is obviously challenging. but the fact is they've got long-term geographic channel and category opportunities inclusive of europe. the big opportunity is china for them. that still looms large on the horizon. >> we often hear about the decline -- i don't want to say decline. the slowing growth rate. how about that? of china. and that things are starting to pull back just a wee bit. it doesn't sound like that concerns you around that country. >> you know, the opportunity for ralph is, it's two-thirds the u.s. today, a third in europe. they really are insignificant in china yet. i think when you look at their
global luxury peers, many of them account for 20% of sales in china. for ralph lauren the runway is very much ahead of them. if anything the slowing in china presents opportunities for them to, perhaps, be opportunistic with real estate as they're looking to build franchise opportunities there. >> got it. thank you very much for joining us. high-end retail clearly doing okay. confusing, then, the high net worth customer is not feeling so okay. in fact, they're not really feeling that bullish at all about the market and the economy. here to take us through the disconnect is cio at hawthorn pnc's bank unit. the average retail investor isn't necessarily high net worth. how are they feeling in terms of where they're sitting? >> i think they're feeling very much the same way. you have to remember that people look at the headlines. the headlines that are going on right now, whether it's europe, the facebook situation that's been reported so well, whether
it's even issues about the fiscal cliff that we're facing right now, it's very difficult, i think, to feel optimistic. i'll give you an example. the market is actually up 25% annualized over the last three years ending march 31st. nobody feels like it's up that way. >> why not? at any given time there are a million problems. macroeconomic concerns. debt problems. whatever. there are always things you can point to and say that concerns me as an investor. are there that many more now than there has been in the past? >> i think there maybe are more now, but they're more significant is the bigger issue. you talk about the debt situation here. greece potentially leaving the european union which, by the way, we don't think is going to happen. we just wrote a piece on that. our chief investment strategist did. i do think these are significant problems for people to have to deal with. >> why are 76% of the wealthy pessimistic when they're wealthy? 76% of impoverished people
should be pessimistic. >> i don't disagree with that. they're looking at the economy, the direction of the country. they have strong feelings about the political landscape. they're very engaged in the political process. they're disenchanted by what they're seeing. >> you could, of course, argue when people are most possess mesic that's the time to start getting optimistic when you're an investor, right. >> i think that's absolutely correct. look at mutual fund flows. we've seen five straight months of equity outflows. to me, we're getting to a point where the market is starting to look very, very interesting. it's got a yield higher than the 10-year treasury. i do think you have to be looking at u.s. domestic stocks. >> tom, pleasure to have you on the set. >> thanks for having me. back over to brian shactman with more on patriot coal. >> seems like they buried the lead. brian sullivan pointed out the credit facility they talked about, the one previously announced, also in this press release it says patriot coal corporation engaged the blackstone group. continuing to work with its
longstanding council. blackstone, private equity group, why would they be involved? maybe something to do with exploring options. who knows. i want to credit kayla tausche for her close reading and picking that up. the stock has picked up a little bit again. for context, down 26%. also a name down almost 50% when it was halted the first time. we'll keep an eye on it and see where the price action goes. back to you. >> we are certainly watching that stock. thank you, brian sfwlnch. coming up next, underwear, shoes and cranes. time for stock talk. a closer look at the timing behind gm's move to defriend facebook. did the automaker have an obligation to go public with the announcement? our street poll. who is having the worst month ever? vote at email@example.com. "street signs" back in two minutes' time. my round trip is approximately 40 miles to work.
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>> upgraded from buy to neutral at jany capital. up 2.4%. >> dfw shoe warehouse. one of my very favorite places to shop. >> apparently a lot of people love to shop. up on earnings. beat by 9 cents a share. same-store sales doubled wall street expectations. guidance on sales above consensus. they increased their dividend to 18 cents a share from 15 cents. look at that move. 10% for dsw. >> who doesn't like discounted designer shoes? really, honestly? manitowoc. did i get it right? >> a little south of green bay, wisconsin. goldman sachs upgrading from a buy to neutral. they see something called a, quote, emerging crane recovery. cranes. not the birds. the heavy machinery stuff. they did cut their target from 17 to 15. still nearly 4 bucks of upside from where it is. stock down 37% over the past -- >> i hear flocks of cranes are also on the upside. >> flocks of sea gulls.
great '80s band. sea zbln gate technology. >> western digital. a two-fehr. morgan stanley comments on hard drive envenn toir sales. they say the largest inventory since january putting a lot of pressure on pricing. the industry still has not recovered from the floods in thailand. not enough, now too much inventory. maybe they overproduced for demand. morgan stanley whacking those two together. >> consult gold locks and get it just right. hugoton? >> the author whose nameless goes under a pseudoname questioning the company's reserves and saying buying the stock is like buying 60 cents for a dollar. >> ouch. >> that is getting -- no other news on hugoton. i checked extensively. one post. people don't like it. smaller company. not a lot of volume. over $500 million market cap before the day began.
$517 million market cap to start the day to be exact. >> an ouch. let's get back to facebook. yesterday, folks, you might remember we were talking about the timing of general motors' announcement to pull its ads from facebook. its paid ads, that is. let's bring in phil lebeau. is there anything new we need to know on this story? >> just that general motors continues to dodge the main question which is why it chose to release the information when it did last week. so far what they're saying is a question was asked about our facebook advertising strategy. we confirmed that we pulled the $10 million in ads. on the face of it, you know, okay. if you take that, then why not come out and make marketing available to discuss why they chose to do it then? it's not like it's a small time ipo nobody had heard of before. we all knew what was going on with facebook. clearly the folks at general motors knew about this as well. that the ipo was coming up. they had to know that they are the largest advertiser or one of the largest in the country.
when they make a decision, it is going to be watched very carefully. if there's anything that people are really questioning right now, why haven't they come out and said, here's why we decided to say it when we said it. >> yeah, you know, there's no legal duty here. i didn't think so. but i contacted some securities lawyers today. it kind of seems weird. was there any kind of fiduciary because they're a customer? >> nobody i talked to said that was the case, phil. they basically indicated because gm didn't have to, it obviously wanted to for some reason. you and i and our producer, fantastic production staff here the way, andrea and sandy, they're coming out and saying, listen. this guy has got maybe, you know, he likes to talk. the new marketing head of gm. >> he makes a name for himself by going out there and shaking things up. that's what general motors is doing right now. he's come out and said, listen, we are changing our approach when it comes to marketing. a lot of people look at that and say fantastic. general motors needs to change the way it's been working over the last several years.
that's what he's been brought in to do. remember, he was with hyundai before he came over to general motors. >> did a great job there. >> absolutely. >> whole lose your job, get the car back, we'll pay you full. that was genius. >> you bet. i've talked to people inside general motors saying i'm not sure coming out and saying we're pulling $10 million in ads from facebook really works to our benefit. makes general motors seem like it's the same general motors, doesn't understand social media. it rubs both ways whether or not this decision to release this was a wise one. >> did you hear about this ferrari fail? >> yeah. >> have you heard about this? >> uh-huh. >> there was a recall of, what, 70 -- we're showing the car on the air, by the way. 74 of them in the world. the california and 458 italian models. is this a major problem. is my car now going to be held up? >> first of all, i want to know how you're affording that car. >> that was match box size.
tha that's what i own. >> when we first reported on this, it came out about a week, week and a half ago. people were like, what, there's a recall at ferrari? yes, even ferrari is going to have a recall from time to time. it doesn't happen a lot because they make small volume in terms of the number of models out there. this does happen from time to time. it's just that when you're talking about a model this expensive, when you talk about a problem that could potentially cause an accident, people go wait a second. that's not supposed to happen. well, it is manufacturing. there's no guarantees. >> you know what? the japanese have an old saying that even monkeys fall out of trees sometimes. thank you very much for that. phil lebeau. straight down to the nasdaq. live breaking news with kayla tausche. who are you hearing on facebook? >> right now we're just getting headlines from reuters saying that regulators may review morgan stanley in the face of a reuters article last night saying that its internet analyst may have shared with some morgan stanley bankers who may have shared with some institutional clients news that he was planning to reduce his revenue
forecast for the company. we should note that it is only reuters that is reporting this at this moment in time. of course, it is still to be tdsed what sort of review would take place. the story's saying that the chairman, chairman ketham of fnra. of course, in the wake of eliot spitzer's time in power, of course, those chinese wall were erected very strong and wide at those banks. even though some of those settlements have expired, it is still largely best practice to keep those walls in between the research and the capital markets departments. as far as what we know about this situation, we're just learning about it on the face of the reports that we're seeing. >> kayla, there's two things to note here. i think these are important things to note. because morgan stanley may have some cover in a sense that facebook came out with that revised s-1. i don't know the timing, kayla. i know you followed the road show. do we know anything about the timing of when morgan stanley
might have began saying this versus when facebook put it out in the public domain in the revised s-1? because if morgan stanley said it after revised s-1, then morgan stanley's in the clear. they're going to say facebook warned us. we warned our clients. also it's important to note analyst ratings and recommendations are protected generally free speech. you can say whatever you want to whoever you want. it just looks bad. >> i think the expectation is that it did come after -- after the disclosure in the s-1. of course, if you're facebook and you have six or seven amendments between when you first file february 1st and when you go public in mid to late may you want to make sure it's that very last disclosure that has maybe a piece of negative information in case you are trying to hide it or are hoping it goes unnoticed, you sort of want to slide it in under the radar. i'm not saying facebook was trying to do that by any means. when we got that disclosure, that's the only thing that was in it.
the difficulty in monetizing mobile. that happened right when they were on the road show when analysts were starting to piece together their estimates. farce the minute by minute breakdown, at this point it's anyone's guess. >> are we going to start hearing about financial restitution for angry investors? >> that's the big talk around here at the nasdaq. the nasdaq has said it will allocate some $13 million to compensating some of those botched trades. as far as how big that pool could swell to, it's really unclear. there's a lot of he said/she said about when those -- when those trades took place. of course, the 11:11 to 11:30 period on friday is definitely one time pocket of interest. then as far as when all the confirmations got delivered by nasdaq, that was 1:50 p.m. then we know some investors didn't get their confirmations till sunday. at this point it's anyone's guess. >> absolutely. what's the opposite of smooth is all i want to know. that is not a smooth ipo. kayla tausche, thank you very much for that. coming up next on "street signs," we're going to go inside espn with the president, john
skipper. >> we talk about the skyrocketing costs of sports content and how fans can now watch on all three screens. assuming you have the three screens. that's screen inflation. it's a problem. we're back after this. >> multiplying. ng. ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh
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i'm bill griffeth. is the eurozone headed back to recession? if it is will it drag down the u.s. economy? a couple economists weigh in. he said facebook was overvalued before it even began trading. now does famed technology analyst and investor dan niles think facebook is starting to look attractive after this selloff? we'll ask him. how can the u.s. avoid falling off a fiscal cliff? former council of economic advisers chairman martin feldstein gives us his economic fix coming up. maria and i look forward to seeing you at the top of the hour from the new york stock exchange. we all know that sports content costs are going through the roof. but espn still making a lot of money for disney. how exactly are they doing it? julia boorstin live in boston at
the cable tv industry conference. she has a special guest. >> thanks so much, brian. i'm joined with the president of espn and co-chairman of disney networks john skipper. thanks for joining us. >> thanks for having me. >> before we get into content costs i have to ask you about an announcement you made last week. a partnership with twitter. why is espn partnering with twitter and what will that mean? >> we think sports is inherently social. we generally believe big social media networks are -- we've done a number of things with facebook and youtube and now with twitter. espn is the number two retweeted brand. what we want to try to do with twitter is figure out around big sporting events how to let people aggregate to a big audience and comment on the event. then how to make money off it. because we're experimenting with twitter on how to do advertising within the context of the aggregation. >> advertising revenue that espn and twitter would share? >> a revenue share. >> interesting. i watch espn.
it's been a hugely successful tv everywhere app. i believe you said it was downloaded 8 million times. would you ever consider offering this as an ala carte service. >> we have no plans to do so. the whole purpose of this is to continue to underpin the value of a paid television subscription. this allows you to watch espn on any device you want to wherever you are. computer, mobile device, ipad, iphone. >> espn is the -- is the highest priced network in all of cable by a long shot. how can you continue to raise prices? do you have room to raise prices? >> we have the highest value. >> and the highest prices. >> by far. they're connected. we get a sub fee commensurate with the value we bring. sports is clearly pre-eminent in attracting audience to paid television. the number one cable network among adult. >> sports content costs continue to rise. how do you continue to manage
the costs? can you pass rising costs along to cable companies? >> we've been at this for 32 years. while there's a lot of attention paid right now to rising programs costs, they have risen fairly consistently over 30 years. we are very disciplined about what we can pay to acquire rights. they are increasing because sports value is increasing because it's the only thing you have to watch live. 99.4% of viewing on espn is live. it's unique content. you can't knock off the rose bowl or sunday night baseball or monday night football. they're pre-eminent cable values that have great value. >> john skipper, thank you so much for talking to us. appreciate it. >> thank you very much for that, julia boorstin. coming up, radio silence. so far from mark zuckerberg. hey, mark, how about a status update for investors? we'll debate. does he need to cut his honeymoon short, come out and say something about the stock
price? >> nobody said being the boss was easy. but lately the c suite feels more like a sorter for many ceos. the result of our street poll and who's having the worst month ever. ever. we have product x and we have product y. we are going to start with product x. the only thing i'll let you know is that it is an, affordable product. oh, i like that. let's move on to product y, which is a far more expensive product. whoaaa. i don't care for that at all. yuck. you picked x and it was geico car insurance
and y was the competitor. is that something you would pay for year after year? i, i like soda a lot but for a change of pace... or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year. because the more we help them, the more we help make opportunity possible.
yeah. it is a fallout. facebook continues to be taken to the wood shed again. down about 6.5%. the celebration of the blame g. cnbc's own briu takes a look at facebook's wild ride. >> reporter: on friday, ceo mark zuckerberg rings nasdaq's opening bell. >> this is the payoff. the opening bell. >> reporter: and then the world stood by for nearly two hours waiting for the investing public to weigh in on the initial offering price, $38. trading began on an up note, starting off above $42. >> apparently has ta ll lly nas clogged. >> reporter: nasdaq's system choked on the volume, the stock took an about face hitting $38. underwriters such as morgan
stanley put in buy orders to stabilize the price, helping the stock end its first day of trading barely above the offering price. then monday morning facebook face plants falling 13% in the first hour. by closing bell, facebook finishes 11% below its ipo price at $34. by tuesday, with analysts raising more questions about revenue for the social network, the stock slides again. as more investors question how much they like owning a piece of the most hyped stock of the century. cnbc business news. through the twists and turns you know who's been m.i.a.? the ceo, mark zuckerberg. why is he not defending his company's reputation? a list of questions just goes on and on. here to discuss the cnbc contributo contributor. great to have you on the show. let me get to you first of all.
i know it's early days and possibly legal restrictions as to what mark zuckerberg can say at this point. nonetheless, shouldn't he be out there guns blazing in defense of all the angry investors? >> he should have been out there on the road shows instead of his answer antics with the hoodie and put up videos of himself. he should have been out there answering questions. we have an unprecedented slew of investigations right now. the justice department or somebody asking questions about the instagram deal, fcc issues about privacy, issues happening last week, was there selective disclosure, who got what information? you have a brilliant genius. we've seen this before. whether or not it was looking at ann wang of wang or ken olson or digital or juan trip of pan am. these are the same creative visionaries we have in this case. in fact, ed land of polaroid
533. tents but a passive board. they didn't survive. the dragon slayers by the end of their career represent the dragons of their and enterprise. >> are we being too tough on mark? it's a couple of days. things have not gone well granted. if i was his general counsel, i'd say, listen, sit back, if you apologize pro aktively for something you may not be responsible for you're going to assume culpability which you don't want to do. >> you don't communicate the facts until you know all the facts, number one. secondly, you know, his role being a ceo, you know, it's leadership's really about making others believe. enabling that belief to become reality. and, you know, they've got this great saying that they're 1% through the journey, and that's exactly right. so i don't think this is the time right now to come out. >> in general, though -- >> i disagree with gary a little.
that's salesmanship to get others to believe and to actually have something beyond the vision, great visionaries get blinded by their own visions. it's important now to actually show the execution, show the plan, show the new visions. we see we have declining ad revenue. we see surveys that keep telling us this is a brand in trouble, it has 28% unfavorability rating in surveys of technology companies, where google and others are soaring in the same space. this is an abc/"washington post" survey this noon. and, you know, 83% of users don't want to use the advertising. >> look, that's -- look, those are good facts to have, but as a ceo, and i am a ceo, you need to make others believe. he has gotten the organization, come on, almost a billion people around the world believe. now, he has a new constituency so he has to make that group believe. but as a ceo, ultimately you have to focus on a couple things. your customers and your employees. and secondly, your shareholders
and performance is the ultimate equalizer. >> well, gary -- >> yeah, the next quarter results, you're right, gary, will make a big difference. if we see good news here. people are going to be right now following the tracks in snow which are not positive tracks. food news would help them. >> gary, i wanted to ask you, i wanted to ask you, he did not come out and do an interview on ipo day like a lot of ceos do. does he have the maturity to face the public, and essentially take on the responsibility of the greatest that comes with obviously having a public company now? >> look, you know, when -- the one thing about him when you look at him, he's authentic, and great leaders, you know, authenticity trumps charisma every day. and he's surrounded himself by talented people. now, clearly, he's young, and what we've seen as corn ferry is the number one predictor of success is learning agility. clearly he is going to have to learn rather quickly. he's got to focus and he's got to focus on the two things that matter, and that's the customers
and the employees. >> you know, michael dell, jeff, was 23 when he took dell public. steve jobs i believe was 25 when apple went public. bill gates was 31. a little older than mark zuckerberg. do we have to focus on the age? >> the age doesn't matter. in every one of these experiences, though, they thad an e pifal moment. michael dell was the sharpest critic, he was somebody constantly challenging the model they had. his own harshest critic. michael dell reinvented dell perhaps six times now and hates it when people create a religion around the company or a cult around him. he's very low key, understated but brilliant guy. what's critical, with bill gates we saw obviously some of the antitrust issues led to the recognition he, too, is not immortal and the transition was excellent. >> jeff, sorry to break in there. we're running out of time. jeff, gary, thank you for your conversation. we have a market flash now. >> we have a deal, ariba halted
for news. we know what the news is. s.a.p. is going to acquire it for $45 a share. for a little bit of color here, the ariba board unanimously approved the transaction. it's a 20% premium over the may 21st closing price. it's $4.3 billion deal. $45 a share for a reriba. we assume when it resumes trading it will get that pop. coming up next, we're going to reveal who is having the worst month ever. period. night-vision goggles, like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
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